July 27 (Bloomberg) -- Former Chinese central bank adviser Yu Yongding repeated his call for China to reduce its Treasury holdings amid an impasse among policy makers on raising the U.S. government’s debt limit.
“U.S. bonds are not safe, but people think they are safe,” Yu, a researcher at a Beijing institute under the Chinese Academy of Social Sciences, told reporters at a briefing in Mumbai, India, today. “That is a mirage.”
President Barack Obama’s administration and Democrats and Republicans in Congress are locked in a standoff over what kind of deficit-cutting measures to tie to an increase in the nation’s $14.3 trillion debt ceiling. The Treasury Department has said the U.S. exhausts its borrowing authority on Aug. 2 and risks going into default.
Yu spoke to reporters before giving a lecture at an event organized by Export-Import Bank of India.
Xia Bin, a current adviser to the Chinese central bank, said July 25 that he’s confident that U.S. political leaders will reach an agreement before the deadline.
A U.S. default would be “disastrous,” Yu said today.
In March, Yu said that China, the biggest foreign holder of Treasuries with $1.16 trillion of the securities, should halt purchases because of the risk of an eventual default. In June, he predicted that credit agencies would limit the severity of any downgrade of the U.S. rating to avoid investor panic.
--With assistance from Zheng Lifei in Beijing. Editors: Paul Panckhurst,
To contact the reporter on this story: Anoop Agrawal in Mumbai at firstname.lastname@example.org
To contact the editor responsible for this story: Paul Panckhurst at email@example.com